Question 1

A major problem with using tradable emissions allowance system to control pollution is

Accepted Answer

A) that it grants firms a license to pollute. 
B) the difficulty in determining the emissions target. 
C) it discourages firms from implementing cost-effective pollution control technology. 
D) that it does not eliminate pollution completely. 
A) that it grants firms a license to pollute. 
B) the difficulty in determining the emissions target. 
C) it discourages firms from implementing cost-effective pollution control technology. 
D) that it does not eliminate pollution completely.

Question 2

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain,the government's action would

Accepted Answer

A) externalize the externality. 
B) result in a marginal social benefit greater than the marginal cost of the electricity. 
C) be an example of supply side economic policy. 
D) internalize the externality. 
A) externalize the externality. 
B) result in a marginal social benefit greater than the marginal cost of the electricity. 
C) be an example of supply side economic policy. 
D) internalize the externality.

Question 3

Suppliers will be willing to supply a product only if

Accepted Answer

A) the price received is less than the additional cost of producing the product. 
B) the price received is at least equal to the additional cost of producing the product. 
C) the price is higher than the average cost of producing the product. 
D) the price received is at least double the additional cost of producing the product. 
A) the price received is less than the additional cost of producing the product. 
B) the price received is at least equal to the additional cost of producing the product. 
C) the price is higher than the average cost of producing the product. 
D) the price received is at least double the additional cost of producing the product.

Question 4

Figure 4-6
   
Figure 4-6 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂ in order to raise the price to P₂.
-Refer to Figure 4-6.What area represents the deadweight loss at P₂?

Accepted Answer

A) C + E + H 
B) G + H 
C) C + E 
D) B + C 
A) C + E + H 
B) G + H 
C) C + E 
D) B + C

Question 5

Table 4-3
 $$\begin{array} { | l | c | } 
\hline\begin{array} { c } 
\text { The Waco } \
\text { Kid's Cowboy } \
\text { Hats }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost } \
\text { (dollars) }
\end{array} \
\hline 1 \text { st hat } & \$ 24 \
\hline \text { 2nd hat } & 30 \
\hline \text { 3rd hat } & 38 \
\hline \text { 4th hat } & 46 \
\hline
\end{array}$$
-Refer to Table 4-3.The table above lists the marginal cost of cowboy hats by The Waco Kid,a firm that specializes in producing western wear.If the price of cowboy hats decreases from $38 to $30

Accepted Answer

A) consumer surplus will rise by $6. 
B) the marginal cost of producing the third cowboy hat will fall to $30. 
C) producer surplus will fall from $22 to $6. 
D) producer surplus will rise from $8 to $24. 
A) consumer surplus will rise by $6. 
B) the marginal cost of producing the third cowboy hat will fall to $30. 
C) producer surplus will fall from $22 to $6. 
D) producer surplus will rise from $8 to $24.

Question 6

The cities of Francistown and Nalady are five miles apart.Francistown enacts a rent control
law that puts a ceiling on rents well below their equilibrium market value.Predict the impact of this law on the competitive equilibrium rent in Nalady,which does not have a rent control law.
a.Illustrate your answer with one demand and supply graph for the apartment market in Francistown and another demand and supply graph for the apartment marketing Nalady.
b.Make sure that your graphs clearly show (1)the initial equilibrium before the rent control in both markets and (2)what happens after the imposition of rent control.
c.Clearly show any shifts in the demand or supply curves,and the movement along the curves for each market.
d.Label your graphs fully and provide written explanation for your graphs.

Accepted Answer

See the figure below.The rent ceiling in

Question 7

What is economic surplus? When is economic surplus at a maximum?

Accepted Answer

Economic surplus is sum of con

Question 8

Table 4-5
 $$\begin{array} { | l | l | } 
\hline \text { Consumer } & \text { Willingness to Pay } \
\hline \text { Violet } & \$ 48 \
\hline \text { Walter } & 40 \
\hline \text { Xavier } & 30 \
\hline \text { Yolarada } & 24 \
\hline \text { Zachary } & 14 \
\hline
\end{array}$$
-Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $36

Accepted Answer

A) Violet and Walter will each buy two tickets. 
B) Walter will receive $4 of consumer surplus from buying one ticket. 
C) Violet and Walter receive a total of $52 of consumer surplus from buying one ticket each.No one else will buy a ticket. 
D) Xavier, Yolanda, and Zachary will receive a total of $68 of consumer surplus since they will buy no tickets. 
A) Violet and Walter will each buy two tickets. 
B) Walter will receive $4 of consumer surplus from buying one ticket. 
C) Violet and Walter receive a total of $52 of consumer surplus from buying one ticket each.No one else will buy a ticket. 
D) Xavier, Yolanda, and Zachary will receive a total of $68 of consumer surplus since they will buy no tickets.

Question 9

A ________ curve shows the marginal cost of producing one more unit of a good or service.

Accepted Answer

A) demand 
B) supply 
C) production possibilities 
D) marginal benefit 
A) demand 
B) supply 
C) production possibilities 
D) marginal benefit

Question 10

Table 4-6
 $$\begin{array} { | l | c | } 
\hline  { \begin{array} { c } 
\text { Marko's } \
\text { Polos }
\end{array} } & \begin{array} { c } 
\text { Marginal } \
\text { Cost } \
\text { (dollars) }
\end{array} \
\hline 1 \text { st shirt } & \$ 7 \
\hline \text { 2nd shirt } & 10 \
\hline \text { 3rd shirt } & 15 \
\hline \text { 4th shirt } & 20 \
\hline
\end{array}$$
-Refer to Table 4-6.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts increases from $15 to $20

Accepted Answer

A) consumers will buy no polo shirts. 
B) the marginal cost of producing the third polo shirt will increase to $20. 
C) producer surplus will rise from $13 to $28. 
D) there will be a surplus of polo shirts. 
A) consumers will buy no polo shirts. 
B) the marginal cost of producing the third polo shirt will increase to $20. 
C) producer surplus will rise from $13 to $28. 
D) there will be a surplus of polo shirts.

Question 11

What is a market failure?

Accepted Answer

A) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C) It refers to a situation where an entire sector of the economy (for example, the airline industry)collapses because of some unforeseen event. 
D) It refers to a breakdown in a market economy because of widespread corruption in government. 
A) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal social cost. 
B) It refers to the inability of the market to allocate resources efficiently up to the point where marginal social benefit equals marginal private cost. 
C) It refers to a situation where an entire sector of the economy (for example, the airline industry)collapses because of some unforeseen event. 
D) It refers to a breakdown in a market economy because of widespread corruption in government.

Question 12

Suppliers will be willing to supply a product in all of the following situations except

Accepted Answer

A) the price received is greater than the additional cost of producing the product. 
B) the price received is at least equal to the additional cost of producing the product. 
C) the price received is equal to the additional cost of producing the product. 
D) the price received is less than the additional cost of producing the product. 
A) the price received is greater than the additional cost of producing the product. 
B) the price received is at least equal to the additional cost of producing the product. 
C) the price received is equal to the additional cost of producing the product. 
D) the price received is less than the additional cost of producing the product.

Question 13

When production generates a negative externality,the true cost of production is the

Accepted Answer

A) private cost of production. 
B) public cost of production. 
C) social cost of production. 
D) average cost of production. 
A) private cost of production. 
B) public cost of production. 
C) social cost of production. 
D) average cost of production.

Question 14

Table 4-6
 $$\begin{array} { | l | c | } 
\hline  { \begin{array} { c } 
\text { Marko's } \
\text { Polos }
\end{array} } & \begin{array} { c } 
\text { Marginal } \
\text { Cost } \
\text { (dollars) }
\end{array} \
\hline 1 \text { st shirt } & \$ 7 \
\hline \text { 2nd shirt } & 10 \
\hline \text { 3rd shirt } & 15 \
\hline \text { 4th shirt } & 20 \
\hline
\end{array}$$
-Refer to Table 4-6.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the market price of Marko's polo shirts is $13,Marko's will produce

Accepted Answer

A) 1 shirt. 
B) 2 shirts. 
C) 3 shirts. 
D) 4 shirts. 
A) 1 shirt. 
B) 2 shirts. 
C) 3 shirts. 
D) 4 shirts.

Question 15

Figure 4-18
   
Suppose there are several paper mills producing paper for a market.These mills, located upstream from a fishing village, discharge a large amount of wastewater into the river.The waste material affects the number of fish in the river, and the use of the river for recreation and as a public water supply source.Figure 4-18 shows the paper market.Use this Figure to answer the following question(s).
-Refer to Figure 4-18.What does S₁ represent?

Accepted Answer

A) the market supply curve that reflects social cost 
B) the market supply curve that reflects only external cost 
C) the market supply curve that reflects only private benefit 
D) the market supply curve that reflects private cost 
A) the market supply curve that reflects social cost 
B) the market supply curve that reflects only external cost 
C) the market supply curve that reflects only private benefit 
D) the market supply curve that reflects private cost

Question 16

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which

Accepted Answer

A) the sum of consumer surplus and producer surplus is at a maximum. 
B) economic surplus is minimized. 
C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. 
D)  the sum of consumer surplus and producer surplus is minimized. 
A) the sum of consumer surplus and producer surplus is at a maximum. 
B) economic surplus is minimized. 
C) the sum of the benefits to firms is equal to the sum of the benefits to consumers. 
D)  the sum of consumer surplus and producer surplus is minimized.

Question 17

Figure 4-7
  
-Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $3,what changes in the market would result in an economically efficient output?

Accepted Answer

A) The price would decrease, the quantity supplied would increase, and the quantity demanded would decrease. 
B) The quantity supplied would decrease, the quantity demanded would increase and the equilibrium price would decrease. 
C) The price would decrease, the demand would increase and the supply would decrease. 
D) The price would decrease, quantity demanded would increase and quantity supplied would decrease. 
A) The price would decrease, the quantity supplied would increase, and the quantity demanded would decrease. 
B) The quantity supplied would decrease, the quantity demanded would increase and the equilibrium price would decrease. 
C) The price would decrease, the demand would increase and the supply would decrease. 
D) The price would decrease, quantity demanded would increase and quantity supplied would decrease.

Question 18

What is deadweight loss? When is deadweight loss equal to zero?

Accepted Answer

Deadweight loss is the reduction in econ

Question 19

Figure 4-14
   
Figure 4-14 shows the market for taxi rides.The following question(s)are based on this figure.
-Refer to Figure 4-14.To legally drive a taxicab in New York City,you must have a medallion issued by the city government.Assume that only 13,200 medallions have been issued.Let's also assume this puts an absolute limit on the number of taxi rides that can be supplied in New York City on any day,because no one breaks the law by driving a taxi without a medallion.Assume as well that each taxi provides 6 trips per day.In that case,the quantity supplied of taxi rides is 79,200 (or 6 rides per taxi × 13,200 taxis).This is shown in the diagram with a vertical line at this quantity.Assume that there are no government controls on the prices that drivers can charge for rides.
a.What would the equilibrium price and quantity be in this market if there were no medallion requirement?
b.If there were no medallion requirement,indicate the area that represents consumer surplus.
c.If there were no medallion requirement,indicate the area that represents producer surplus.
d.If there were no medallion requirement,indicate the area that represents economic surplus.
e.What are the price and quantity with the medallion requirement?
f.With a medallion requirement in place,what area represents consumer surplus?
g.With a medallion requirement in place,what area represents producer surplus?
h.With a medallion requirement in place,what area represents the deadweight loss?
i.Based on your answers to parts (c)and (g),are taxicab drivers better off with the medallion requirement for taxicabs than without?
j.Are consumers better off with or without the medallion requirement for taxicabs?

Accepted Answer

a. P = $20,Q = 100,000 rides.
b. Consume

Question 20

Which term refers to a legally established maximum price that firms may charge?

Accepted Answer

A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff 
A) a price ceiling 
B) a subsidy 
C) a price floor 
D) a tariff

A major problem with using tradable emissions allowance system to control pollution is

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain,the government's action would

Suppliers will be willing to supply a product only if

Figure 4-6 Figure 4-6 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂ in order to raise the price to P₂. -Refer to Figure 4-6.What area represents the deadweight loss at P₂?

What is economic surplus? When is economic surplus at a maximum?

Table 4-5 Consumer Willingness to Pay Violet \ 48 Walter 40 Xavier 30 Yolarada 24 Zachary 14 -Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $36

A ________ curve shows the marginal cost of producing one more unit of a good or service.

Table 4-6 Marko's Polos Marginal Cost (dollars) 1 st shirt \ 7 2nd shirt 10 3rd shirt 15 4th shirt 20 -Refer to Table 4-6.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts increases from $15 to $20

What is a market failure?

Suppliers will be willing to supply a product in all of the following situations except

When production generates a negative externality,the true cost of production is the

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $3,what changes in the market would result in an economically efficient output?

What is deadweight loss? When is deadweight loss equal to zero?

Which term refers to a legally established maximum price that firms may charge?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 4: Market Efficiency and Market Failure

A major problem with using tradable emissions allowance system to control pollution is

Assume that production from an electric utility caused acid rain.If the government imposed a tax on the utility equal to the cost of the acid rain,the government's action would

Suppliers will be willing to supply a product only if

Figure 4-6 Figure 4-6 shows the market for granola.The market is initially in equilibrium at a price of P₁ and a quantity of Q₁.Now suppose producers decide to cut output to Q₂ in order to raise the price to P₂. -Refer to Figure 4-6.What area represents the deadweight loss at P₂?

What is economic surplus? When is economic surplus at a maximum?

Table 4-5 Consumer Willingness to Pay Violet \ 48 Walter 40 Xavier 30 Yolarada 24 Zachary 14 -Refer to Table 4-5.The table above lists the highest prices five consumers are willing to pay for a concert ticket.If the price of one of the tickets is $36

A ________ curve shows the marginal cost of producing one more unit of a good or service.

Table 4-6 Marko's Polos Marginal Cost (dollars) 1 st shirt \ 7 2nd shirt 10 3rd shirt 15 4th shirt 20 -Refer to Table 4-6.The table above lists the marginal cost of polo shirts by Marko's,a firm that specializes in producing men's clothing.If the price of polo shirts increases from $15 to $20

What is a market failure?

Suppliers will be willing to supply a product in all of the following situations except

When production generates a negative externality,the true cost of production is the

Economic efficiency is defined as a market outcome in which the marginal benefit to consumers of the last unit produced is equal to the marginal cost of production,and in which

Figure 4-7 -Refer to Figure 4-7.The figure above represents the market for iced tea.Assume that this is a competitive market.If the price of iced tea is $3,what changes in the market would result in an economically efficient output?

What is deadweight loss? When is deadweight loss equal to zero?

Which term refers to a legally established maximum price that firms may charge?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters